American hedge fund Pershing Square, led by the activist investor Bill Ackman, announced Tuesday that it had offered to buy Universal Music Group in a merger, saying it believed the music giant was undervalued by stock markets.
Pershing Square said its cash and stock offer to Universal shareholders was worth 30.40 euros ($35.15) a share, valuing Universal with its stable of top artists including Taylor Swift, The Weeknd and Lady Gaga at around 55 billion euros.
Pershing Square said in a statement that it had submitted the offer to Universal’s board, hoping to close the deal by the end of 2026.
After a merger with Pershing Square SPARC Holdings, an acquisition company, the new entity would be listed on the New York Stock Exchange.
“UMG’s stock price has languished due to a combination of issues that are unrelated to the performance of its music business,” Ackman said in a statement.
Bill Ackman says Universal Music’s stock price has ‘languished’ despite the group’s potential – Copyright AFP/File Patrick T. Fallon
The company pointed to uncertainty about French conglomerate Bollore’s plans for its 18 percent stake in Universal, a delay in listing on the US stock market, and “underutilisation of UMG’s balance sheet” among concerns that have held back the shares’ performance.
Pershing Square bought 10 percent of UMG from the French media giant Vivendi, also owned by Bollore, in August 2021.
If the merger goes ahead, the new company would aim to increase its dividend payouts by two percent each year and maintain borrowing of 2.5 times its operating profit (EBITDA), Pershing Square said in a letter to Universal’s Board.
“All free cash flow after required investments in the business will be used for share repurchases,” the letter added.
Universal shares were up on the Amsterdam stock exchange following news of the offer, adding more than 11 percent to trade at just over 19 euros around 0950 GMT.
